Sen. Begich Talks to U.S. Oil & Gas Company CEOs

Presses for Alaska gas line, balanced OCS leasing

June 18, 2009 -- At a time of increasing tension around the world, the U.S. should be doing everything possible to encourage domestic energy production, including continuing incentives for oil and gas development and building Alaska's natural gas pipeline. That was the message today from U.S. Senator Mark Begich, speaking to the leaders of more than two dozen of the world's largest oil and gas companies.

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Sen. Begich was the noon guest speaker at the American Petroleum Institute (API) Policy Committee meeting in Washington, D.C.

"Just as we have a new administration and a new Congress, the oil and gas industry is facing new challenges: price volatility in the face of the world economic downturn, and historic climate change legislation. That's why I'm troubled by proposals from the national administration to scale back incentives designed to reduce our dependence on foreign sources of energy," Begich told the group.

Begich said he has shared his concerns with President Obama and will continue to work to convince the administration to modify proposals that could eliminate $30 billion from U.S. oil and gas production investment, costing thousands of jobs in Alaska and across the country.

Specifically, Begich is concerned about the possible elimination of Intangible Drilling and Development costs (IDC) and percentage depletion. IDC has been a part of the tax code since 1913 and eliminating it would remove more than $3 billion invested in domestic production.

Similarly, percentage depletion, an accounting measure for the decline in resource values produced from a property, has been allowed since 1926. It is particularly important for smaller, marginal wells owned by American owned- independent oil and gas companies. Percentage depletion makes production feasible on wells that account for nearly a third of domestic production.

"Certainly renewable energy and conservation must be an essential part of a national energy policy," Begich said. "But you can't make the transition overnight as national decision-makers finally come to grips with the consequences of climate change."

In his speech, Begich said the next big issue in Alaska and for the industry is development of the Outer Continental Shelf, believed to hold millions of barrels of oil and natural gas. Begich said he continues to have conversations with Interior Secretary Ken Salazar about OCS.

"My message is simple. As America's energy storehouse, Alaskans generally welcome OCS development, as long as it's done right and where competing resources are protected. Developing these reserves is important to increased domestic production, extending the life of existing Alaska facilities, and making the Alaska Natural Gas Pipeline more economic."

Among those attending the session were CEOs and other top officials of BP America, Chevron, ConocoPhillips, Exxon Mobil Corp., Shell Oil Company, Chevron, Anadarko, Occidental Petroleum Company and others.

Begich reminded the industry leaders of the progress for the Alaska gas line in Senate Energy Bill. Reported out of committee earlier this week, it increased federal loan guarantees from $18 billion to $30 billion, plus inflation; grants a right-of-way through Denali National Park & Preserve for an in-state "bullet" line; and allows use the Federal Financing Bank to finance the gas line project.

"I'm encouraged by the recent news from Exxon and Trans-Canada working together on the gas line. I look forward to any good news that the producers are getting serious about this national priority," Begich said.

Begich said another issue where Alaska is in the national spotlight is climate change. More than any other state, Alaska is experiencing the impacts of climate change, from coastal erosion that is undercutting villages, to warming permafrost, the thawing of the Arctic sea ice, and even changing fish migration.

Begich said the climate change legislation pending in Congress will need to meet Alaska's needs and prioritize clean-burning natural gas as a bridge fuel for the next three to four decades.

Begich said industry is a key partner as all of the issues are discussed. He said he will continue work with both Republicans and Democrats in Congress to help them understand Alaska's unique role in the energy picture.

"I believe government needs to set some fair ground rules and then let industry do the work," Begich concluded.

Source: Senator Mark Begich